Wilson v. Frito-Lay North America, Inc. et al

Filing
73

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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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United States District Court
For the Northern District of California
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MARKUS WILSON and DOUG CAMPEN,
individually and on behalf of
all others similarly situated,
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Plaintiffs,
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v.
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FRITO-LAY NORTH AMERICA, INC.,
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Defendant.
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Case No. 12-1586 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S
MOTION TO DISMISS PLAINTIFFS'
SECOND AMENDED COMPLAINT
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I.
INTRODUCTION
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Now before the Court is Defendant Frito-Lay North America,
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Inc.'s ("Defendant") motion to dismiss Plaintiffs Markus Wilson and
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Doug Campen's ("Plaintiffs") second amended complaint.
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("SAC"), 59 ("MTD").
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("Opp'n"), 68 ("Reply"), and suitable for decision without oral
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argument, Civ. L.R. 7-1(b).
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Court GRANTS in part and DENIES in part Defendant's motion.
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///
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ECF Nos. 47
The motion is fully briefed, ECF Nos. 64
For the reasons explained below, the
1 II.
BACKGROUND
2
A.
3
The parties are familiar with this case's basic facts, as
Factual Background
4
summarized below.
Defendant makes snack food products, including
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"Lay's Classic Potato Chips," "Lay's Classic Potato Chips," "Lay's
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Honey Barbeque Potato Chips," "Lay's Kettle Cooked Mesquite BBQ
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Potato Chips," "Cheetos Puffs," and "Fritos Original Corn Chips"
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(collectively the "Purchased Products").
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Purchased Products, and claim to have been misled by their labels,
Plaintiffs bought the
United States District Court
For the Northern District of California
10
between March 29, 2008 and March 29, 2012 (the "Class Period").
In
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their SAC, they also bring claims on behalf of a putative class of
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people in California and elsewhere who bought a variety of
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Defendant's other Products that the named Plaintiffs did not buy. 1
Plaintiffs allege that Defendant's marketing of the Products
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is misleading because: (1) some Products are labeled "All Natural"
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despite containing artificial or unnatural ingredients, flavoring,
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coloring, or preservatives; (2) some Products are labeled as
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containing "0 Grams Trans Fat" despite having total fat levels that
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render such a claim misleading; (3) some Products contain MSG but
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are labeled as having "No MSG"; and (4) Defendant's website, whose
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address appears on some Products' labels, is a "label" subject to
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FDA regulations, and it makes claims about the Products that are
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misleading and unlawful.
Plaintiffs claim that they care about buying healthy foods,
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e.g., foods with artificial ingredients or high levels of fat, and
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27
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1
When the Court discusses these non-purchased products alongside
the Purchased Products, the Court refers to them collectively as
the "Products." Separately, they are the "Non-Purchased Products".
2
1
that they would not have bought any of the Products if they knew
2
that Defendant's claims about such ingredients were not true.
3
e.g., SAC ¶¶ 46-47, 60, 64-65, 80, 82, 86-87, 104, 128, 141, 154.
See,
4
B.
Procedural Background
5
In their FAC, Plaintiffs asserted nine causes of action
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against Defendant: (1-3) violations of the "unlawful," "unfair,"
7
and "fraudulent" prongs of California's Unfair Competition Law's
8
("UCL"), Cal. Bus. & Prof. Code § 17200, et seq.; (4-5) violations
9
of the "misleading and deceptive" and "untrue" prongs of
United States District Court
For the Northern District of California
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California's False Advertising Law ("FAL"), Cal. Bus. & Prof. Code
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§ 17500, et seq.; (6) violations of California's Consumers Legal
12
Remedies Act ("CLRA"), Cal. Civ. Code § 1750, et seq.; (7)
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restitution based on unjust enrichment or quasi-contract; (8)
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breach of warranty under California's Song-Beverly Act, Cal. Civ.
15
Code § 1790, et seq.; and (9) breach of warranty under the federal
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Magnuson-Moss Act, 15 U.S.C. § 2301, et seq.
17
Defendant moved to dismiss the FAC.
The Court granted
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Defendant's motion in part and denied it in part, dismissing
19
Plaintiffs' breach of warranty claim with prejudice but granting
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Plaintiffs leave to amend their other claims.
21
Order") at 31-32.
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plead more specific facts about the Non-Purchased Products and
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about how Defendant's website could constitute "labeling" such that
24
claims asserted on it could predicate Plaintiffs' various causes of
25
action.
26
ECF No. 46 ("Apr. 1
Specifically, the Court allowed Plaintiffs to
In their SAC, Plaintiffs include more facts about the Non-
27
Purchased Products and Defendant's website.
28
warranty claim having been dismissed with prejudice, and with
3
With their breach of
1
Plaintiffs having chosen not to re-plead their restitution claim,
2
the only causes of action remaining in the case are Plaintiffs'
3
UCL, FAL, and CLRA claims.
4
theories for their UCL, FAL, and CLRA claims, and also alleges new
5
violations based on the Non-Purchased Products.
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moves to dismiss the SAC.
The SAC elaborates on Plaintiffs'
Defendant now
7
8 III.
LEGAL STANDARD
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A.
A motion to dismiss under Federal Rule of Civil Procedure
United States District Court
10
For the Northern District of California
Motions to Dismiss
11
12(b)(6) "tests the legal sufficiency of a claim."
Navarro v.
12
Block, 250 F.3d 729, 732 (9th Cir. 2001).
13
on the lack of a cognizable legal theory or the absence of
14
sufficient facts alleged under a cognizable legal theory."
15
Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.
16
1988).
17
should assume their veracity and then determine whether they
18
plausibly give rise to an entitlement to relief."
19
Iqbal, 556 U.S. 662, 679 (2009).
20
must accept as true all of the allegations contained in a complaint
21
is inapplicable to legal conclusions.
22
elements of a cause of action, supported by mere conclusory
23
statements, do not suffice."
24
Twombly, 550 U.S. 544, 555 (2007)).
25
generally "limited to the complaint, materials incorporated into
26
the complaint by reference, and matters of which the court may take
27
judicial notice."
28
540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor
"Dismissal can be based
"When there are well-pleaded factual allegations, a court
Ashcroft v.
However, "the tenet that a court
Threadbare recitals of the
Id. (citing Bell Atl. Corp. v.
The court's review is
Metzler Inv. GMBH v. Corinthian Colls., Inc.,
4
1
Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).
2
B.
Rule 9(b)
3
Claims sounding in fraud are subject to the heightened
4
pleading requirements of Federal Rule of Civil Procedure 9(b),
5
which requires that a plaintiff alleging fraud "must state with
6
particularity the circumstances constituting fraud."
See Kearns v.
7
Ford Motor Co., 567 F. 3d 1120, 1124 (9th Cir. 2009).
"To satisfy
8
Rule 9(b), a pleading must identify the who, what, when, where, and
9
how of the misconduct charged, as well as what is false or
United States District Court
For the Northern District of California
10
misleading about [the purportedly fraudulent] statement, and why it
11
is false."
12
Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks
13
and citations omitted).
United States ex rel Cafasso v. Gen. Dynamics C4 Sys.,
14
C.
Leave to Amend
15
Under Federal Rule of Civil Procedure 15(a), leave to amend
16
"should be freely granted when justice so requires," bearing in
17
mind that "the underlying purpose of Rule 15 . . . [is] to
18
facilitate decision[s] on the merits, rather than on the pleadings
19
or technicalities."
20
2000) (en banc) (internal citations, quotation marks, and
21
alterations omitted).
22
discretion to deny leave to amend due to 'undue delay, bad faith or
23
dilatory motive on [the] part of the movant, repeated failure to
24
cure deficiencies by amendments previously allowed, undue prejudice
25
to the opposing party . . . , [and] futility of amendment.'"
26
Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th
27
Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962))
28
(alterations in original).
Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
However, a court "may exercise its
5
"[W]here the plaintiff has previously been granted leave to
1
2
amend and has subsequently failed to add the requisite
3
particularity to its claims, the district court's discretion to
4
deny leave to amend is particularly broad."
5
Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009) (internal
6
quotations, citations, and alterations omitted).
7
failure to cure a complaint's deficiencies by previous amendment is
8
reason enough to deny leave to amend.
9
Corp., 545 F.3d 733, 742 (9th Cir. 2008) (citing Foman, 371 U.S. at
Zucco Partners, LLC v.
Indeed, repeated
Abagninin v. AMVAC Chem.
United States District Court
For the Northern District of California
10
182); Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir.
11
1990)).
12
13 IV.
DISCUSSION
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A.
15
The Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 301 et
The Statutory Framework
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seq., as amended by the Nutrition Labeling and Education Act of
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1990 ("NLEA"), 21 U.S.C. § 343(r), et seq., is the operative
18
statute in this matter.
19
The many subsections of 21 U.S.C. § 343 establish the
20
conditions under which food is considered "misbranded."
Generally,
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food is misbranded under 21 U.S.C. § 343(a)(1) if "its labeling is
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false or misleading in any particular."
23
regulate the information that must be included in all packed
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products' "nutrition box," as well as all other nutrient content
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claims that appear elsewhere on the label.
Sections 343(q) and (r)
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Section 343(q) governs information that must be disclosed
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about certain nutrients in food products -- principally in the
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nutrition box area.
Section 343(r) discusses "nutrition levels and
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1
health-related claims" about food products made anywhere on their
2
labels.
3
content or health information that a manufacturer includes on the
4
food label or packaging.
5
has classified these nutrient claims as "express" (e.g., "100
6
calories"), "implied" (e.g., "high in oat bran"), and "health
7
claims," which "characteriz[e] the relationship of any substance to
8
a disease or health-related condition."
9
101.14; see also Chacanaca v. Quaker Oats Co., 752 F. Supp. 2d
It governs all voluntary statements about nutrition
The Food and Drug Administration ("FDA")
21 C.F.R. §§ 101.13,
United States District Court
For the Northern District of California
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1111, 1116-17 (N.D. Cal. 2010) (describing the statutory scheme).
11
Section 343(r) clarifies that it does not govern nutrition content
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claims made under Section 343(q) (i.e., inside the nutrition box),
13
though an accompanying regulation, 21 C.F.R. § 101.13, clarifies
14
that "[i]f such information is declared elsewhere on the label or
15
in labeling, it is a nutrition content claim and is subject to the
16
requirements for nutrient content claims [under Section 343(r)]."
17
See Chacanaca, 752 F. Supp. 2d at 1117.
18
Plaintiffs' state law claims are based on California's Sherman
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Food, Drug, and Cosmetic Act ("Sherman Act"), Cal. Health & Safety
20
Code § 109875 et seq., which adopts and incorporates the FDCA.
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Sherman Act § 110100 ("All food labeling regulations and any
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amendments to those regulations adopted pursuant to the federal
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acts in effect on January 1, 1993, or adopted on or after that date
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shall be the food regulations of this state.").
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includes provisions of the FDCA and NLEA that set forth food
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labeling and packing requirements.
See
This specifically
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B.
Standing as to the Non-Purchased Products
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To satisfy Article III standing, plaintiffs must allege: (1) a
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1
concrete, particularized, actual or imminent injury-in-fact; (2)
2
that the injury is traceable to the defendant's action; and (3)
3
that a favorable ruling could redress the injury.
4
the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,
5
180-81 (2000).
6
III standing by alleging that they purchased a product they
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otherwise would not have purchased, or that they spent too much on
8
such a product, in reliance on a defendant's representations in ads
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or on labels.
See Friends of
Plaintiffs in a case like this one can show Article
See, e.g., Brazil v. Dole Food Co., Inc., -- F.
United States District Court
For the Northern District of California
10
Supp. 2d --, 2013 WL 1209955, at *11-13 (N.D. Cal. Mar. 25, 2013).
11
It is Plaintiffs' burden to show standing.
12
Wildlife, 504 U.S. 555, 561 (1992).
13
Lujan v. Defenders of
The parties do not dispute whether Plaintiffs have pled
14
standing as to the Purchased Products.
15
they have standing as to the Non-Purchased Products.
16
The question is whether
In putative class actions like this one, this Court has often
17
held that plaintiffs can demonstrate standing at the pleading stage
18
if they plead sufficiently detailed facts that the non-purchased
19
products are "substantially similar" to the purchased products for
20
which they have standing.
21
Cream, Inc., No. C 11-2910 EMC, 2012 WL 2990766, at *11 (N.D. Cal.
22
July 20, 2012).
23
whether the challenged products are of the same kind, whether they
24
are comprised of largely the same ingredients, and whether each of
25
the challenged products bears the same alleged mislabeling.
26
id. at *13.
27
28
See, e.g., Astiana v. Dreyer's Grand Ice
Factors that other courts have considered include
See
Defendant argues that Plaintiffs fail to establish standing or
state a claim for the Non-Purchased Products.
8
MTD at 5-6.
First,
1
Defendant notes that Plaintiffs added eighty-five new products --
2
the Non-Purchased Products -- to their SAC.
3
plead to have bought these products.
4
long lists of products that they flatly state contain unlawful or
5
misleading statements.
6
("All Natural" and "No MSG" labeling), 84 ("0 Grams Trans Fat"
7
labeling).
8
Defendant argues that because Plaintiffs allege no facts stating
9
that the Non-Purchased Products are "the same or similar" to the
Plaintiffs do not
Instead they simply provide
SAC ¶¶ 44 ("All Natural" labeling), 62
The SAC provides no other detail about these products.
United States District Court
For the Northern District of California
10
Purchased Products with respect to Plaintiffs' claims, Plaintiffs
11
cannot -- even in a putative class action -- assert causes of
12
action as to products that are not in fact substantially similar to
13
the products they actually bought.
14
notes that while Plaintiffs include purported images of the Non-
15
Purchased Products' labels in their SAC, see SAC Ex. 8 (product
16
labels), the SAC does not state that any Plaintiff actually saw
17
these labels.
See MTD at 6-9.
Defendant also
MTD at 9-10.
18
Plaintiffs oppose these arguments, contending that the eighty-
19
five Non-Purchased Products are "substantially similar" to the five
20
Purchased Products.
21
are "potato chips, corn chips, and puffed corn products," all of
22
which they allege to be unlawfully or misleadingly labeled.
23
Opp'n at 3-4.
24
by the same manufacturer and, with the exception of flavors,
25
contain the same ingredients and implicate the same concerns.
26
at 4.
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28
According to Plaintiffs, all of the Products
See
Plaintiffs claim that all of the Products are made
Defendant is right.
Id.
Plaintiffs have failed to allege
substantial similarity among the Purchased Products and the Non-
9
1
Purchased Products.
Plaintiffs have taken lists of snack foods,
2
appended them to paragraphs of their SAC, and asserted in their
3
briefs -- not in their pleadings -- that they are all basically the
4
same.
5
provide do not help.
6
of the eighty-five new Products are actionably mislabeled, and the
7
Court is not inclined to pore over each ingredient list and guess.
8
The Court instructed Plaintiffs to be clear about why any Non-
9
Purchased Products were similar enough to the Purchased Products
The Court is not convinced, and the exhibits Plaintiffs
Plaintiffs take no time to explain how each
United States District Court
For the Northern District of California
10
for standing purposes.
Order at 12 (setting forth clear guidelines
11
for amendment on this point).
Plaintiffs fail to do so.
12
In their SAC, Plaintiffs simply provide a list of Non-
13
Purchased Products, attach barely-legible labels (purportedly as
14
they appeared during the Class Period), and assert that these
15
labels are unlawful or misleading.
16
not enough -- the Court cannot just assume that every one of the
17
Non-Purchased Products' labels is actionable in the same way as the
18
more fully described Purchased Products' labels are.
19
the label on the purportedly actionable "Lay's Balsamic Sweet
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Onion" package, SAC Ex. 8 at 25, has a stamp that, unlike any other
21
product, reads "Made With All Natural Potatoes and Seasonings,"
22
which is not the same as the labels discussed in the Court's Order
23
on the FAC, which state "Made With All Natural Ingredients."
24
Similarly, the "Miss Vickie's Sea Salt & Vinegar" package, SAC Ex.
25
8 at 35, has a stamped ribbon that reads only "All Natural."
26
See SAC ¶¶ 42, 62, 84.
This is
For example,
The Court will not assume that each of these subtly different
27
Products is like all the others.
To meet the plausibility standard
28
of Rule 8, Plaintiffs have to say more, especially when they are
10
1
asserting standing as to Products they did not purchase --
2
otherwise their pleadings amount to unacceptably bare legal
3
conclusions.
4
Plaintiffs' SAC's allegations about the Non-Purchased Products are
5
not detailed or plausible enough to survive a motion to dismiss.
6
Plaintiffs' boilerplate claims as to the Non-Purchased
Iqbal, 556 U.S. at 663; Twombly 550 U.S. at 370.
7
Products are therefore DISMISSED.
8
prejudice, since the Court has already given Plaintiffs leave to
9
amend on this point, as well as clear instructions on how to do so
United States District Court
For the Northern District of California
10
successfully.
11
C.
This dismissal is with
Whether Websites Mentioned on Product Labels Constitute
Labeling
12
In their FAC, Plaintiffs contended that Defendant's website
13
14
constitutes "labeling" of the Products under the FDCA.
The Court
15
dismissed Plaintiffs' claims that were based on the website,
16
because the Court did not find that Plaintiffs had sufficiently
17
alleged that any of Plaintiffs' cited website language was drawn
18
closely enough to any Product to merit the website's constituting
19
"labeling" under the FDCA.
Now Plaintiffs cite extensive language from the website and
20
21
claim that it explains and supplements Defendant's other statements
22
about the Products, such that the Court should find that the
23
website language constitutes labeling.
24
SAC ¶¶ 105-54).
25
about other companies' websites, which they say deserve deference.
26
Id. at 10-12. 2
27
2
28
See Opp'n at 9-10 (citing
Plaintiffs also cite several FDA warning letters
Plaintiffs also cite a third-party website's language about MSG
and food labeling. Opp'n at 22 n.11. The Court declines to take
judicial notice of this website, since it has not been referenced
11
1
Section 321(m) defines "labeling" as "all labels and other
2
written, printed, or graphic matter (1) upon any article or any of
3
its containers or wrappers, or (2) accompanying such article."
4
issue here is whether statements made on the www.fritolay.com
5
website "accompany" the Named Products such that they can be
6
classified as "labeling" under the FDCA.
7
The
It is true that statements not actually printed on a label
8
itself can constitute "labeling" for FDCA purposes.
What matters
9
is whether the separate material serves the purpose of labeling,
United States District Court
For the Northern District of California
10
which is to supplement or explain the product.
11
States, 335 U.S. 345, 349-350 (1950) ("One article or thing is
12
accompanied by another when it supplements or explains it . . . No
13
physical attachment one to the other is necessary.
14
textual relationship that is significant."); Alberty Food Prods.
15
Co. v. United States, 185 F.2d 321, 324-25 (9th Cir. 1950) (citing
16
Kordel for this proposition); see also United States v. Harkonen,
17
No. C 08-0164 MHP, 2009 WL 1578712, at *9 (N.D. Cal. June 4, 2009)
18
(stating that Kordel " remains the leading Supreme Court authority
19
on the scope of the labeling provision.").
20
Plaintiffs base their claims on the fact that some of the Named
21
Products include phrases like "Visit our website @ fritolay.com" in
22
tiny print at the bottom of their back labels.
23
Plaintiffs claim that Defendant's marketing language on the
24
www.fritolay.com or www.lays.com websites constitutes mislabeling
25
under the FDCA.
26
Kordel v. United
It is the
In this matter,
From this
The Court is not persuaded by Plaintiffs' argument that the
27
28
in any pleading and Plaintiffs do not explain why it should be
incorporated now.
12
1
Court owes deference to two warning letters that the FDA sent to
2
two other companies.
3
interpretation of its own ambiguous regulation is controlling
4
unless "plainly erroneous or inconsistent with the regulation."
5
Bassiri v. Xerox Corp., 463 F.3d 927, 930 (9th Cir. 2006) (quoting
6
Auer v. Robbins, 519 U.S. 452, 461 (1997)).
7
this case has contended that the FDA's regulations on labeling are
8
ambiguous, and the Court does not find that they are.
9
FDA's regulation is very clear on this point, and when the FDA has
It is true that an agency's informal
However, no party in
Indeed, the
United States District Court
For the Northern District of California
10
directly referenced it, the agency's instruction mirrors the
11
Supreme Court precedent discussed above:
12
13
14
15
16
[I]f the label for a product contained a
statement that referred the consumer to a
specific website for additional information
about a claim for the product, the website
is likely to be 'labeling.'
The websites,
in these cases, are considered written,
printed, or graphic matter that supplements
or explains the product and is designed for
use in the distribution and sale of the
product.
17
18
SAC Ex. 20 (FDA Letter, "Guidance for Industry and FDA: Dear
19
Manufacturer Letter Regarding Food Labeling") at 3.
20
On this point, the Court declines to analogize to the
21
situations the FDA considers in its warning letters.
22
do not address how the FDA regulations on labeling are to apply.
23
Instead they discuss specific websites that the FDA had
24
independently concluded constituted labeling.
25
such specific conclusions about Defendant's Products in this case,
26
and the Court does not find that labels' references to Defendant's
27
website constitute "labeling" for FDA regulatory purposes.
28
website address appears below Defendant's physical address, not
13
Those letters
The FDA has made no
The
1
near the ingredients list or any nutritional facts.
2
Product's packaging does Defendant direct consumers to its website
3
for more facts about the labeled Product.
4
not find that Defendant's website constitutes "labeling" under the
5
FDCA.
6
Nowhere on any
The Court therefore does
"Labeling" as a regulatory matter aside, Plaintiffs also fail
7
to plead that they ever saw, read, or were even aware of any
8
website before this suit.
9
irrelevant because, according to them, there is no requirement that
Plaintiffs admit this but claim it is
United States District Court
For the Northern District of California
10
a purchaser rely on a particular statement in order to bring a UCL
11
unlawfulness claim based on that statement.
12
According to Plaintiffs, misbranded food products are unlawful by
13
nature and therefore actionable.
14
Holding for them on this point would be an affront to state and
15
federal standing rules.
16
California law requires UCL plaintiffs to plead injury and reliance
17
-- a legislative decision based specifically on curtailing lawsuits
18
by plaintiffs who have had no contact with advertising, for
19
example.
20
2011) (affirming that UCL and FAL claims must be pled with injury
21
and reliance).
22
lawsuits by all manner of plaintiffs who could simply troll grocery
23
stores and the Internet looking for any food product that might
24
form the basis of a class-action lawsuit.
25
point of these consumer protection laws.
26
Id.
Opp'n at 13.
Plaintiffs are wrong.
Federal standing requires an injury, and
Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310, 326 (Cal.
Ignoring these basic legal rules would invite
Surely that is not the
Since Plaintiffs have twice failed to indicate how Defendant's
27
website could form the basis of a good-faith UCL, FAL, or CLRA
28
cause of action, Plaintiffs' claims based on Defendant's website
14
1
are DISMISSED WITH PREJUDICE.
2
D.
Plaintiffs' Remaining Claims
3
The CLRA, FAL, and UCL, which are the basis of Plaintiffs'
4
first through sixth causes of action, are California consumer
5
protection statutes. The UCL makes actionable any "unlawful, unfair
6
or fraudulent business act or practice."
7
17200.
8
statement concerning property or services that is "untrue or
9
misleading."
Cal. Bus. & Prof. Code §
The FAL makes it unlawful to make or disseminate any
Id. § 17500.
The CLRA also prohibits "unfair methods
United States District Court
For the Northern District of California
10
of competition and unfair or deceptive acts or practices."
11
Civ. Code § 1770.
12
Cal.
Plaintiffs' case, broadly, has two parts: (1) the UCL
13
unlawfulness claims based on Plaintiffs' contention that
14
Defendant's products are misbranded as a matter of law and
15
therefore are predicates for a UCL unlawfulness violation, and (2)
16
the rest of Plaintiffs' tort claims, which are premised on
17
Plaintiffs' allegations that Defendant's labels are misleading,
18
unfair, and fraudulent.
19
20
i.
See SAC ¶¶ 4, 8.
Plaintiffs' Misbranding Theory
Plaintiffs' UCL "misbranding theory" -- as distinct from the
21
portion of their UCL claim based on Plaintiffs allegedly having
22
been misled or deceived by Defendant's labels -- is that
23
Defendant's labels are unlawfully misbranded under the FDCA and the
24
Sherman Law, and are therefore actionable under the UCL's
25
unlawfulness prong even absent allegations of reliance.
26
at 13-14.
27
facet of their UCL claim is that Defendant's mere alleged violation
28
of the underlying regulations, without more, is enough to state a
See Opp'n
In other words, Plaintiffs' theory of liability for this
15
1
2
claim for a UCL unlawfulness prong violation.
As a threshold issue, the parties dispute whether Rule 9(b)'s
3
particularity requirements govern Plaintiffs' UCL unlawfulness
4
claims.
5
UCL unlawfulness claims based on the CLRA and FAL, because all of
6
those theories rely on allegations of a unified course of
7
fraudulent conduct -- i.e., the mislabeled Products.
8
Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003); Kearns v.
9
Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (holding that,
The Court finds that it does at least as to Plaintiffs'
Ness v. Ciba–
United States District Court
For the Northern District of California
10
where "TAC allege[d] a unified fraudulent course of conduct,"
11
claims were "grounded in fraud" and the "entire complaint" had to
12
be pled "with particularity").
13
misbranding theory is not grounded in misrepresentation or
14
deception, but the Court finds otherwise.
15
Plaintiffs' SAC that the behavior that Plaintiffs allege violated
16
FDA regulations and the Sherman Law is misrepresentation or
17
deception, because Plaintiffs are asserting that Defendant used
18
deceptive labeling practices to hide the truth of the Products'
19
ingredients.
20
Plaintiffs are subject to Rule 9(b) pleading standards for their
21
unlawfulness claim, but they met it.
22
they must also plead reliance for an unlawfulness claim, as they
23
must for UCL unfairness and fraud claims.
24
Plaintiffs contend that their
It is clear from
However, the Court finds that this dispute is a wash:
The only question is whether
According to Plaintiffs, unlawful conduct is the only
25
necessary element for UCL unlawfulness liability, unlike the
26
fraudulent or unfairness prongs which require particularity as to
27
reliance and injury.
28
"misbranding theory" is not divorced from its other UCL theories:
See id.
This is incorrect.
16
Plaintiffs'
1
they are all connected, since, as noted above, Plaintiffs'
2
misbranding theory is essentially of a piece with their other
3
theories.
4
The California Supreme Court has interpreted the UCL as
5
requiring plaintiffs to have suffered economic injury "as a result
6
of" the unfair competition they allege.
7
326.
8
unlawful activity would have standing to sue.
9
Court noted above and as the California Supreme Court stated in
Kwikset, 51 Cal. 4th at
Otherwise plaintiffs who had no contact with the allegedly
This would, as the
United States District Court
For the Northern District of California
10
Kwikset, be an invitation to shakedown suits.
11
4th at 335 n.21 (stating that this rule exists to curb "shakedown
12
suits by parties who had never engaged in any transactions with
13
would-be defendants").
14
interpretation, finding that in accordance with California law,
15
plaintiffs must show that they lost money or property because of
16
reliance on an allegedly unlawful practice, in order to establish
17
standing for UCL unlawfulness claims.
18
Application Litig., 844 F. Supp. 2d 1040, 1071 (N.D. Cal. 2012); In
19
re Actimmune Mktg. Litig., No. C 08-02376 MHP, 2010 WL 3463491, at
20
*8 (N.D. Cal. Sept. 1, 2010), aff'd, 464 F. App'x 651 (9th Cir.
21
2011) (alleging unlawfulness alone, without reliance, "only
22
accomplishes half of [the plaintiff's] burden in a UCL unlawful
23
prong action," since "as a result of" in the statutory language
24
places a burden of reliance on the plaintiff); Durell v. Sharp
25
Healthcare, 183 Cal. App. 4th 1350, 1363 (Cal. Ct. App. 2010).
26
See Kwikset, 51 Cal.
Other courts agree with this
See, e.g., In re iPhone
"Reliance is proved by showing that the defendant's
27
misrepresentation or nondisclosure was 'an immediate cause' of the
28
plaintiff's injury-producing conduct."
17
In re Tobacco II Cases, 46
1
Cal. 4th 298, 326 (Cal. 2009) (citation and alteration omitted).
2
"A plaintiff may establish that the defendant's misrepresentation
3
is an immediate cause of the plaintiff's conduct by showing that in
4
its absence[,] the plaintiff in all reasonable probability would
5
not have engaged in the injury-producing conduct."
6
and quotation marks omitted).
Id. (citation
The issue at this point is therefore whether Plaintiffs
7
8
establish, at the pleading stage, that Defendant's alleged
9
violation of labeling laws alone -- separate from any alleged fraud
United States District Court
For the Northern District of California
10
or deception connected with Plaintiffs' reliance or injury --
11
supports a UCL unlawfulness claim.
12
for Defendant.
13
action for UCL unlawfulness relies solely on Defendant's alleged
14
violation of the Sherman Law or FDA regulations, that claim is
15
DISMISSED WITH PREJUDICE because Plaintiffs fail to allege reliance
16
under this theory.
17
because the allegedly misbranded products were "legally worthless
18
and had no economic value," see Opp'n at 13, is insufficient to
19
save this claim.
20
having been harmed by being deceived into buying Products whose
21
ingredients they specifically wanted to avoid, not that they were
22
harmed in some non-specific way by purchasing Products that they
23
later learned were "legally worthless."
On this point, the Court finds
To the extent that Plaintiffs' first cause of
Plaintiffs' argument that they were harmed
Plaintiffs' SAC supports their allegations of
Plaintiffs do, however, plausibly allege violations of the FAL
24
25
and CLRA, as the Court found in its April 1 Order.
26
Plaintiffs' UCL unlawfulness claim survives to the extent that it
27
is predicated on violations of those laws.
28
///
18
Accordingly,
ii.
1
2
"All Natural" and "0 Grams Trans Fat" Claims
Defendant argues that Plaintiffs' claims based on Defendant's
3
"All Natural" and "0 Grams Trans Fat" statements should be
4
dismissed, because Plaintiffs have failed to allege injury,
5
deception, or reliance under Twombly and Rule 9(b).
6
Plaintiffs assert that this is an attempt to reargue the motion to
7
dismiss that the Court denied, see Opp'n at 15, 19, but Defendant
8
insists that it is raising new arguments as to the sufficiency of
9
Plaintiffs' pleadings, Reply at 10.
United States District Court
For the Northern District of California
10
The Court agrees with Plaintiffs.
Reply at 10.
The Court has already found
11
Plaintiffs' pleadings on these points sufficient to survive a
12
motion to dismiss.
13
under Twombly and Rule 9(b) in its first Order.
14
to reconsider the matter.
15
DENIED.
16
deceived by these claims to survive a motion to dismiss.
17
If it had not, it would have dismissed them
The Court declines
Defendant's motion on this point is
Plaintiffs plead enough about having been misled or
iii.
"No MSG" Claims
18
In the April 1 Order, the Court found that Plaintiffs' claims
19
based on Defendant's "No MSG" labels were not preempted by federal
20
regulations.
21
was actually the FDA's interpretation of its own rules about MSG,
22
made in a November 2012 announcement that the Court found warranted
23
deference.
24
November 2012 regulatory statement was a binding interpretation of
25
the FDA's own rules, the parties had not explained how (if at all)
26
that interpretation could apply retroactively to Defendant's labels
27
as they appeared during the Class Period, prior to the November
28
2012 statement.
Apr. 1 Order at 19-20.
Id.
The regulation in question
However, the Court noted that while the FDA's
Id. at 21 n.4.
Now the parties dispute whether
19
1
the FDA's binding interpretation applies retroactively, thereby
2
making Defendant's pre-November 2012 "No MSG" labels actionable.
3
Defendant contends that Plaintiffs' claims are preempted because
4
they would impose restrictions that did not exist before November
5
2012.
Plaintiffs claim that the November 2012 statement was just an
6
7
affirmation of an FDA policy that had been in place for decades: in
8
short, any ingredient that is a source of MSG as opposed to being
9
MSG itself (like torula yeast) will bar a food product from being
United States District Court
For the Northern District of California
10
labeled "No MSG," even though that ingredient itself must be
11
labeled by its common name in the product's ingredient box.
12
Opp'n at 21-24.
13
"No MSG" prior to November 2012 would still be actionably
14
mislabeled if it contained an ingredient that was a source of MSG.
15
Id.
16
1990 and 1996, which all inform companies that their food products
17
were mislabeled because the products contained ingredients that
18
were sources of MSG.
19
Plaintiffs also cite an August 31, 1995 FDA Backgrounder that
20
states "the FDA considers foods whose labels say 'No MSG' or 'No
21
Added MSG' to be misleading if the food contains ingredients that
22
are sources of free glutamates, such as hydrolyzed protein."
23
Ex. 15 ("1995 Backgrounder"). 3
See
So according to Plaintiffs, any Product labeled
Plaintiffs point to several FDA warning letters, sent between
See Opp'n at 22-23 (citing Opp'n Exs. 4-5).
Opp'n
Defendant first argues that the Court had ruled that
24
25
Plaintiffs' claims could proceed as to claims based on purchases
26
made after November 19, 2012.
Reply at 13.
That is a misreading
27
28
3
The Court takes judicial notice of these documents under Federal
Rule of Evidence 201.
20
1
of the April 1 Order: the Court expressly made no finding as to
2
retroactivity there.
3
important parts of Defendant's argument concern the significance of
4
the FDA's 1995 Backgrounder and the mid-1990s warning letters.
5
First, Defendant argues that the 1995 Backgrounder was only
6
evidence of an abandoned rule, not of FDA Policy.
7
Second, Defendant argues that the warning letters Plaintiffs cite
8
were sent during 1990 and 1996, when the FDA was considering the
9
rule -- discussed in the 1995 Backgrounder -- that it later
The more
Reply at 13.
United States District Court
For the Northern District of California
10
abandoned.
11
policy until November 19, 2012 only required ingredients containing
12
MSG to be labeled separately from MSG, and nothing more.
13
Defendant's arguments are underpinned by the Court's conclusion
14
that the FDA's November 2012 statement clarified an ambiguous
15
regulation, and by the Ninth Circuit's holding that retroactive
16
application of such a regulatory clarification contravenes due
17
process.
18
Cir. 2008).
19
Id.
See Apr. 1 Order at 19-21.
Finally, Defendant claims that in any event, FDA
Id.
United States v. AMC Entm't, Inc., 549 F.3d 760, 770 (9th
Defendant is correct.
Plaintiffs cite the 1996 proposed
20
rulemaking and several pre-1996 warning letters, but as the Court
21
stated in its April 1 Order, the FDA's regulations between then and
22
November 19, 2012 were ambiguous.
23
resolved that ambiguity.
24
complying with a regulation that was not explicitly clarified until
25
November 19, 2012 would buck due process and Ninth Circuit
26
precedent.
The November 2012 statement
To insist that Defendant should have been
The Court declines to do either.
27
Before the FDA's November 2012 clarification, the only
28
information about the FDA's MSG regulations that would have been
21
1
available to Defendant were warning letters based on specific
2
factual circumstances and a proposed rule that was abandoned.
3
Defendant was simply not on notice during the Class Period that its
4
labels did not comply with the FDA rule.
5
770.
6
regulations generally, to ambiguous statements about the
7
regulation.
8
2307, 2319 (2012) (holding that an isolated, ambiguous agency
9
statement did not fulfill the fair notice requirement when the
AMC Entm't, 549 F.3d at
These amount, as the Court found concerning pre-2012 FDA
See FCC v. Fox Television Station, Inc., 132 S. Ct.
United States District Court
For the Northern District of California
10
government wanted to impose a large fine on a television network).
11
Plaintiffs' claims based on Defendant's "No MSG" labels predating
12
the November 19, 2012 clarification are DISMISSED WITH PREJUDICE.
13
14
iv.
Plaintiffs' Non-California Purchases
Finally, Defendant states that Plaintiffs' SAC seeks to expand
15
their case to include a nationwide putative class of consumers.
16
MTD at 22.
17
Plaintiffs sue only based on violations of California law, and the
18
Supreme Court of California has clarified that state statutes like
19
the UCL, FAL, and CLRA presumptively do not apply to occurrences
20
outside California.
21
4th 1191, 1207 (Cal. 2011)).
22
argument is better suited for the class certification stage, not a
23
motion to dismiss.
24
Defendant argues that such claims must fail, because
Id. (citing Sullivan v. Oracle Corp., 51 Cal.
Plaintiffs respond that Defendant's
Opp'n at 24-25.
Defendant is correct.
California law presumes that the
25
legislature did not intend a statute to be "operative, with respect
26
to occurrences outside the state, . . . unless such intention is
27
clearly expressed or reasonably to be inferred from the language of
28
the act or from its purpose, subject matter or history."
22
Sullivan,
1
51 Cal. 4th at 1207 (citations and quotations omitted).
With
2
regard to the UCL, FAL, and CLRA, non-California residents' claims
3
are not supported "where none of the alleged misconduct or injuries
4
occurred in California."
5
169 F. Supp. 2d 1119, 1126 (citing Norwest Mortg. Inc. v. Super.
6
Ct., 72 Cal. App. 4th 214, 222 (Cal. Ct. App. 1999)); see also In
7
re Toyota Motor Corp., 785 F. Supp. 2d 883, 918 (C.D. Cal. 2011).
8
In determining whether California law should apply to a certain
9
claim, courts consider facts like where the defendant is located,
Churchill Village, LLC v. Gen. Elec. Co.,
United States District Court
For the Northern District of California
10
where the class members are located, and where decisions about the
11
behavior in question were made.
12
at 917.
13
Defendant is located in Texas, and Plaintiffs have not alleged any
14
activity within California except their own purchase of the
15
Purchased Products.
See In re Toyota, 785 F. Supp. 2d
In this case, Plaintiffs are located in California,
First, the Court is not persuaded by Plaintiffs' argument that
16
17
this issue should wait until the class certification stage.
Class
18
allegations typically are tested on a motion for class
19
certification, not at the pleading stage.
20
Corp., C10-1210-TEH, 2010 WL 3077671, at *2 (N.D. Cal. Aug. 6,
21
2010).
22
pleadings to determine whether the interests of the absent parties
23
are fairly encompassed within the named plaintiff's claim."
24
Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982).
25
courts have struck class allegations where it is clear from the
26
pleadings that class claims cannot be maintained.
27
Apple Inc., 672 F. Supp. 2d 978, 990 (N.D. Cal. 2009).
28
///
See Collins v. Gamestop
However, "[s]ometimes the issues are plain enough from the
23
Gen.
Thus, some
E.g., Sanders v.
1
Second, at this point, those claims fail as a matter of law
2
because nothing in Plaintiffs' complaint alleges that any of the
3
out-of-state purchases were directed from California or had
4
anything to do with California.
5
points amount to nothing more than conclusions of law without any
6
supporting facts.
7
California could assert the same California causes of action that
8
Plaintiffs do, but there is no plausible way for a non-California
9
citizen who purchased Defendant's Products outside California to
United States District Court
For the Northern District of California
10
Plaintiffs' allegations on these
Non-California citizens who made purchases in
bring these claims.
Plaintiffs' California law claims based on activity occurring
11
12
in other states are all DISMISSED WITH PREJUDICE.
In two amended
13
complaints, Plaintiffs have failed to give a plausible account of
14
how or why a non-California plaintiff could sue under California
15
tort law for purchases made outside the state from a Texan company
16
that, at most, advertises and sells its products in California.
17
18
V.
CONCLUSION
19
For the reasons explained above, Defendant Frito-Lay North
20
America, Inc.'s motion to dismiss Plaintiffs Markus Wilson and Doug
21
Campen's second amended complaint is GRANTED in part and DENIED in
22
part.
The Court orders as follows:
23
24
•
are DISMISSED WITH PREJUDICE.
25
26
Plaintiffs' claims based on the Non-Purchased Products
•
Plaintiffs' claims based on the "All Natural" and "0
27
Grams Trans Fat" statements are undisturbed.
28
motion is DENIED as to those claims.
24
Defendant's
1
•
Plaintiffs' UCL unlawfulness claim is DISMISSED WITH
2
PREJUDICE to the extent that it is based on misbranding
3
laws.
4
•
Plaintiffs' "No MSG" claims are DISMISSED WITH PREJUDICE
5
to the extent that those claims are predicated on
6
activity predating the FDA's November 19, 2012 guidance.
7
8
•
Plaintiffs' claims based on purchases that occurred
outside California are DISMISSED WITH PREJUDICE.
9
United States District Court
For the Northern District of California
10
IT IS SO ORDERED.
11
12
Dated: October 24, 2013
13
UNITED STATES DISTRICT JUDGE
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
25

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